Salesforce.com, inc. (NYSE:CRM) traded higher by 4.6% on Thursday after the company reported impressive second-quarter earnings numbers and raised its full-year guidance.

On Wednesday, Salesforce reported second-quarter adjusted EPS of $1.48 on revenue of $6.34 billion. Both numbers exceeded analyst expectations of 92 cents and $6.24 billion, respectively. Revenue was up 23% from a year ago.

Salesforce reported Platform and Other segment revenue of $1.88 billion, up 24%. Its Service Cloud revenue was $1.6 billion, up 23%. Core Sales Cloud revenue was up 15% to $1.48 billion in the quarter.

Looking ahead, Salesforce raised its full-year EPS guidance to between $4.36 and $4.38 on revenue of between $26.2 billion and $26.3 billion. Analysts had been expecting $3.82 in EPS on $26 billion in revenue.

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Multiple Growth Drivers: Credit Suisse analyst Stephen Ju said Salesforce has multiple growth drivers, and Slack is gaining momentum.

“Salesforce delivered a strong quarter with broad strength in its Customer 360 platform driven by a combination of Sales, Service, Marketing & Commerce, Platform, Tableau, MuleSoft and Slack,” Ju wrote.

JMP Securities analyst Patrick Walravens said Salesforce management’s tone was positive, and the company landed some big deals in the quarter.

“In addition to the company’s largest-ever ARR deal, Mr. Patterson noted expansions with companies including PayPal, Coinbase, and Elran as well as new customer wins with Milano, RBC Wealth Management, and GEICO,” Walravens wrote.

Bank of America analyst Brad Sills said across-the-board strength in core clouds and recent acquisitions make Salesforce a top stock pick.

“Large multi-product deals remained strong, suggesting large enterprises increasingly leveraged Salesforce for strategic, transformational front office initiatives,” Sills wrote.

Impressive Margins: Raymond James analyst Brian Peterson said Salesforce’s margin expansion is particularly impressive given its growth investments and dilutive acquisitions.

“Moreover, prior investor concern around M&A synergies also look overblown, particularly regarding Tableau (9 of top 10 deals) and Slack (Connect grew 200% y/y),” Peterson wrote.

BMO Capital Markets analyst Keith Bachman said Salesforce’s current remaining performance obligation guidance leaves room for potential upside.

“Management is raising margin guidance for the year, including the outperformance this Q in margins, though we believe that 2H will be down y/y due to the inclusion of Slack,” Backman wrote.

Piper Sandler analyst Brent Bracelin said updated guidance helped clarify the margin damage the Slack acquisition will do in the near-term

“We suspect the investor debate now shifts onto the timing risk around when the operating margin can climb back above 20%+,” Bracelin wrote.

Minor Concerns: Needham analyst Scott Berg said accelerating Sales Cloud growth was certainly positive, but the quarter was far from perfect for Salesforce.

“We remain on the sidelines after the 2QF22 print due to decelerating cRPO growth (+19% excluding 4 points of Slack impact vs +22.8% in 1Q22) and minimal operating margin expansion (+20bps) even though total revenues increased 23.1% Y/Y,” Berg wrote.

Roth Capital Partners analyst Richard Baldry said Salesforce’s top and bottom-line numbers were impressive, but its aggressive M&A strategy has sharply increased its balance sheet leverage.

“With the dilutive impact of its Slack acquisition guided to materially dilute 2HF22 earnings, we remain sidelined by CRM's aggressive earnings dilution pattern and increasingly leveraged balance sheet,” Baldry wrote.

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